Dustin's Blog

Good Faith Estimate (GFE) | Items Required by Lender to Be Paid in Advance

Adonai Financial | Florida Home Mortgages — Mon, 10 Mar 2008 14:47:19 -0500

By Dustin R. Burke, Adonai Financial

Items Required by Lender to Be Paid in Advance is a section of the Good Faith Estimate that lists the items that are required to be paid in advance. The Good Faith Estimate is a RESPA required document. These items are identified with a number in the 900s. Because of the numbering this section is often called the 900 Section.

***This is a list of the most common fees listed in the 900 Section of the GFE. The fees associated with a specific loan may change. Actual fees may be more or less depending on the time of year, or even time during the month, that the loan closes.

901 - Prepaid Interest: is prepaid interest charged for the loan. This fee will vary and depend on the date of the month the loan is closed.

902 - Mortgage Insurance Premium: is prepaid mortgage insurance premium (MIP). This fee is only charged if the borrower has to pay MIP, usually charged for loans with very little equity in the property being used as collateral.

903 - Hazard Insurance Premium: is the hazard insurance, or homeowner's insurance, being prepaid. Most lenders require that the insurance policy be in force one full year from the date of closing.

These are only a sample of the most common fees and costs in the 900 Section of the GFE.

As you can imagine, there more information than I can put here. If you would like more information about fees on a GFE or items discussed in this section please send me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Good Faith Estimate (GFE) | Items Payable In Connection With Loan

Adonai Financial | Florida Home Mortgages — Sun, 09 Mar 2008 13:06:32 -0500

By Dustin R. Burke, Adonai Financial

Items Payable In Connection With Loan, often referred to as the 800 Section of the GFE, is typically the first section listed on the Good Faith Estimate (GFE) and includes most fees directly associated with obtaining the loan from the lender, broker, or bank.

Loan charges and costs listed in this section are typically identified with a number in the 800 and most charges associated in this section are figured into the Annual Percentage Rate (APR) on the Truth-in-Lending Disclosure.

***This is a list of the most common fees listed in the Items Payable In Connection with Loan section of the GFE. The fees associated with a specific loan may change from program to program. Actual fees may be more or less depending on the loan program.

801 - Loan Origination Fee: a fee charged by the lender or bank for originating or creating the loan. Many times this fee and the Loan Discount Fee are referred to as "points". Please review an article called Florida Mortgages |When Paying Points Makes Sense for more information on paying points.

802 - Loan Discount Fee: a fee charged to the lender or bank to get a lower mortgage rate. Many times this fee and the Loan Origination Fee are referred to as "points". Please review an article called Florida Mortgages |When Paying Points Makes Sense for more information on paying points.

803 - Appraisal Fee: a fee charged to pay the cost of an independent appraiser.

804 - Credit Report Fee: a fee charged to pay the cost of the credit report.

805 - Lender's Inspection Fee: a fee charged by the lender for the cost of inspecting a property. Some lenders call this an appraisal field review where the appraisal is double checked by the lender for accuracy.

808 - Mortgage Broker Fee: an upfront fee charged by a mortgage brokerage business. In rare cases this fee is identified as points and has the same effect as points. Please review an article called Florida Mortgages |When Paying Points Makes Sense for more information on paying points.

809 - Tax Related Service Fee: a fee charged by the lender to pay the costs of handling tax related matters. This fee is typically very small.

810 - Processing Fee: an administration fee charged for processing the loan (i.e. collecting application details, collecting underwritings requirements, ordering inspections, title, etc.)

810 - Underwriting Fee: an administration fee charged for underwriting the loan.

812 - Wire Transfer Fee: a fee charged for the costs of wiring money on the borrowers' behalf.

These are only a sample of the most common fees and costs in the 800 Section of the GFE. Other fees may include courier fees, MERS registration fees, electronic storage fees, etc.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Florida Mortgages | Good Faith Estimate

Adonai Financial | Florida Home Mortgages — Sun, 09 Mar 2008 00:12:25 -0600

By Dustin R Burke, Adonai Financial

The Real Estate Settlement Procedures Act (RESPA) requires that mortgage lenders and brokers provide a Good Faith Estimate (GFE) to customers who apply for certain RESPA regulated loans. A GFE is a itemization of expected loan costs and fees associated with the loan and must be provided to the customer within 3 business days of application.

The GFE is only an estimate and the final costs and fees may be different. The GFE itemizes the fees and costs into six basic headings with each line item cost having a specific number associated with the fee or costs.

This is a list of the six sections of the GFE and link with extensive descriptions on each section and many of the fees included in those sections.

Items Payable In Connection With Loan is typically the first section listed on the Good Faith Estimate and includes most fees directly associated with obtaining the loan from the lender, broker, or bank.

Items Required by Lender to Be Paid in Advance are items that are required to be paid in advance.

Reserves Deposited with the Lender are prepaid fees that are collected by the lender to pay at a later date and are typically called escrow items.

Title Charges are fees associated with the title of the property and closing of the loan

Government Recording & Transfer Costs are fees associated with government costs of the transaction which may include recording fees, stamps on the deed and mortgage, etc.

Additional Settlement Charges are charges that do not appear in the other fives sections of the Good Faith Estimate.

Articles have been (or soon will be) written regarding each section of the GFE with their respective costs. As you can imagine there is a lot of information available through the links above. If you need assistance with a specific fee on the GFE please send me an email at dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Florida Mortgages | Directory of Mortgage Application Forms & Disclosures

Adonai Financial | Florida Home Mortgages — Sat, 08 Mar 2008 23:17:56 -0600

By Dustin R Burke, Adonai Financial

When an individual applies for a mortgage loan the bank, lender, or mortgage broker is required to provide the borrower with certain disclosures. This is a directory of many of those disclosures. Some forms have a link where you may view the form with a detailed description.

In alphabetical order:

Borrower Authorization

Borrower Certification & Authorization

Credit Score Information Disclosure

Equal Credit Opportunity Act (ECOA)

Disclosure Notices

Flood Insurance Disclosure

Florida Lender Disclosure

Florida Mortgage Brokerage Business Contract

Good Faith Estimate (GFE)

Good Faith Estimate Provider Relationship

Mortgage Loan Origination Agreement

Patriot Act

Residential Loan Application: Form 1003

Right to Receive Appraisal

Tax Return Request - Copy of Return: Form 4506

Tax Return Request - Copy of Transcripts: Form 4506-T

Truth-in-Lending

Servicing Disclosure Statement

This list is a basic summary of the most common mortgage forms used in the Florida market. External links are consistently being added to update the descriptions on these forms. If a link is not currently available for a form you are interested in please email me for to get more information at dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Florida Mortgages | Real Estate Settlement Procedures Act (RESPA)

Adonai Financial | Florida Home Mortgages — Fri, 07 Mar 2008 11:17:15 -0600

By Dustin R Burke, Adonai Financial

The Real Estate Settlement Procedures Act, (also know as "RESPA"), was an Act passed by Congress in 1974.

RESPA was created because various companies associated with the buying and selling of real estate, such as lenders, real estate firms, appraisers, and title insurance companies, etc., were often engaging in providing undisclosed kickbacks to each other.

It is believed that these kickbacks inflated the costs of real estate transactions and obscured price competition by promoting bait and switch tactics.

For example, a lender advertising a home loan might have advertised the loan with a 5% interest rate, but then when one applies for the loan one is told that one must use the lender's affiliated title insurance company and pay $5,000 for the service (whereas the normal rate is $1,000). The title company would then have paid $4,000 to the lender. This was made illegal.

Section 8 of the Act forbids kickbacks between lenders and third-party settlement service agents in the real estate settlement process. The Act, among other things, requires lenders to provide a good faith estimate for all the approximate costs of a particular loan and finally a HUD-1 (for purchase real estate loans) or a HUD-1A (for refinances of real estate loans) at the closing of the real estate loan. The final HUD-1 or HUD-1A allows the borrower to know specifically the costs of the loan and to whom the fees are being allotted.

The acts full text can be viewed here:

http://www.law.cornell.edu/uscode/html/uscode12/usc_sup_01_12_10_27.html.

The Department of Housing and Urban Development has a RESPA FAQ site that can be viewed here:

http://www.hud.gov/offices/hsg/sfh/res/resconsu.cfm

If you have any general questions on what acts RESPA requires of mortgage business please feel free to send me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Florida Foreign National Mortgages - Underwriting Guidelines / LTV Update

Adonai Financial | Florida Home Mortgages — Thu, 06 Mar 2008 17:05:03 -0600

By Dustin R. Burke, Adonai Financial

We are very excited and please to announce we are now able to offer STATED INCOME loans to Foreign National clients with a down payment of 30% in central Florida. This includes loans secured by condotels. This is an increase in loan to value of 10% over our previous product offering. Stated income loans to foreign nationals were previously restricted to 60% LTV in central Florida on most loan amounts.

Full documentation loans are still available at 75%. Condotel loans are not available on this program.

If you have any questions about the new loan guidelines please contact our office at 863-680-2700 or send me an email to dustin.burke@adonaifinancial.com.

***Disclaimer: this is not an offer or commitment to lend by Adonai Financial Corporation - the borrower must meet all underwriting conditions required prior to the issuance of a loan commitment.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

When Paying Points Make Sense

Adonai Financial | Florida Home Mortgages — Wed, 05 Mar 2008 01:11:55 -0600

By Dustin R Burke, Adonai Financial

I recently read a post by Christopher Hill titled "Do I pay a point or not?" I work with clients from all over the world and the American's have been taught NOT to pay points, while the remainder of the clients I work with WANT to pay points. I posted a blog on "ARM or not to ARM?" where I also stated that Americans wanted a 30 year fixed and not an ARM while clients from abroad wanted the opposite.

Points, just like ARM loans, must be used correctly. Here are SIX real life examples - three on fixed rate mortgages / three on ARM mortgages.

***When a borrower chooses NOT to pay points then we will apply what he/she would have paid for the point(s) and place it toward the loan amount.

Fixed Rate Mortgage Examples: this real life example is based on a 30 year fixed.

Option 1 - In this option the borrower is paying 2 pts and getting the lowest rate.

		Interest paid after:	Total Cost w/ points	Costs vs. Option 2	Costs vs. Option 3
Loan Amount:	$300,000	12 mo: $17,899	$23,899	+2094	+4150
Rate:	6%	24 mo: $35,572	$41,572	+1154	+2292
Points:	2 ($6000)	36 mo: $53,003	$59,003	+211	+425
Payment	$1,798	48 mo: $70,178	$76,178	-735	-1448
		60 mo: $87,082	$93,082	-1683	-3325

Option 2 - In this option the borrower is paying 1 pt and taking a slightly higher rate.

		Interest paid after:	Total Cost w/ points	Costs vs. Option 1	Costs vs. Option 3
Loan Amount:	$297,000	12 mo: $18,835	$21,805	-2094	+2056
Rate:	6.375%	24 mo: $37,448	$40,418	-1154	+1138
Points:	1 ($2970)	36 mo: $55,822	$58,792	-211	+214
Payment	$1,852	48 mo: $73,943	$76,913	+735	-713
		60 mo: $91,795	$94,765	+1683	-1614

Option 3 - In this option the borrower is not paying points and will take the highest rate of the three Fixed Rate options.

		Interest paid after:	Total Cost w/ points	Costs vs. Option 1	Costs vs. Option 2
Loan Amount:	$294,000	12 mo: $19,749	$19,749	-4150	-2056
Rate:	6.750%	24 mo: $39,280	$39,280	-1138	-1138
Points:	0	36 mo: $58,578	$58,578	-425	-214
Payment	$1,906	48 mo: $77,626	$77,626	+1448	+713
		60 mo: $96,407	$96,407	+3325	+1614

Fixed Rate Assessment: It appears that Option 1 is best if the borrower is going to keeping the loan for 3+ years. Option 3 appears best if the borrower is going to keep the loan for less than 3 years. And Option 2 will save the borrower on upfront expenses vs. Option 1 and give the borrower a lower monthly payment than Option 3.

From my vantage point, for an investment longer than 3 years Option 1 appears to be the best of the Fixed Rate Mortgage Options. For a short term investment Options 3 appears to be the best choice.

Adjustable Rate Mortgage Examples: this real life example is based on a 5/1 ARM.

Option 4 - In this option the borrower is paying 2 pts and getting the lowest rate.

		Interest paid after:	Total Cost w/ points	Costs vs. Option 5	Costs vs. Option 6
Loan Amount:	$300,000	12 mo: $13,775	$18,775	+313	-1601
Rate:	4.625%	24 mo: $27,327	$32,327	+1403	+1798
Points:	2 ($6000)	36 mo: $40,654	$46,654	+2106	+4185
Payment	$1,542	48 mo: $53,727	$59,727	+3813	+7576
		60 mo: $66,533	$72,533	+5523	+10968

Option 5 - In this option the borrower is paying 1 pt and taking a slightly higher rate.

		Interest paid after:	Total Cost w/ points	Costs vs. Option 4	Costs vs. Option 6
Loan Amount:	$297,000	12 mo: $15,492	$18,462	-313	-1288
Rate:	5.25%	24 mo: $30,760	$33,730	-1403	+395
Points:	1 ($2970)	36 mo: $45,790	$48,760	-2106	+2079
Payment	$1,640	48 mo: $60,570	$63,540	-3813	+3763
		60 mo: $75,086	$78,056	-5523	+5445

Option 6 - In this option the borrower is not paying points and will take the highest rate of the three ARM options.

		Interest paid after:	Total Cost w/ points	Costs vs. Option 4	Costs vs. Option 5
Loan Amount:	$294,000	12 mo: $17,174	$17,174	+1601	+1288
Rate:	5.875	24 mo: $34,125	$34,125	-1798	-395
Points:	0	36 mo: $50,839	$50,839	-4185	-2079
Payment	$1,739	48 mo: $67,303	$67,303	-7576	-3763
		60 mo: $83,501	$83,501	-10968	-5445

ARM Assessment: It appears that Option 4 is best if the borrower is going to keeping the loan for 1+ year(s). Option 6 appears best if you are going to keep the loan for less than 1 year. And Option 4 has not real substantive advantage over Option 4 or 6.

From my vantage point Option 4 appears to be the best of the ARM Options. For a very short term investment Options 6 appears to be the best choice.

Best overall: Given that most mortgage loans are paid off every 3 - 5 years either by refinances or the sale of the property Option 1 and Option 4 seems to be the best. Both options also pay the most points.

And, after further evaluation Option 4 offers savings over Option 1 of $12,349 after 36 months, $16,451 after 48 months, and $20,549 after 60 months. So, if a borrower can risk the rate adjustment I would typically recommend Option 6 - an ARM with points.

What are you thoughts on points? Do you agree or disagree? Let me know by sending me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Soft Market Policies

Adonai Financial | Florida Home Mortgages — Tue, 04 Mar 2008 20:57:18 -0600

By Dustin R Burke, Adonai Financial

Since the real estate boom went bust a new term has reared its head into the real estate professional's vernacular. It's the term soft market. Soft markets are often the result of having too many sellers and not enough buyers in real estate market which often drives home prices lower. When prices drop from one calendar quarter over another the market is defined by banks as a depreciating market or a soft market.

When a specific MSA or even ZIP code is labeled with the stigma of being soft banks and mortgage typically implement lending policies that are more restrictive such as requiring a higher down payment on a house, etc.

From my observation soft market policies typically impact the less affluent first. A potential buyer in an economically distressed area typically has less liquidity proportional to their income than a potential buyer purchasing a home in a more affluent area. Therefore the buyers with lesser means are often pushed out of the market whereas a buyer with greater means isn't so drastically affected by the soft market policies. The end result is the markets with less means are often hurt more.

We already know that soft markets are a direct result of too many sellers and not enough buyers. When banks and mortgage lenders implement soft market policies that restrict the number of potential buyers it further accelerates the problem with declining values.

These soft market policies act as a double edged sword. They are put in place to curb the banks and mortgage lenders exposures to potential risks but they also hasten the problem of declining values. So, what to do? Well, we've all heard of these huge write downs that major banks have taken as losses on mortgages. Since the banks have already written down the "bad debt" and I think they should take action that would work to stabilize the market rather than destabilize it.

Mortgage companies and banks made billions during the boom and have suffered severe losses because of the bust. I'm not sure exactly what to do about the declining values in certain areas, but don't think that restricting liquidity further is the answer. If anything, easier money would start to curb the problem.

What do you think should be done to help curb the problem in declining markets? Do you think soft market policies are the answer? Feel free to let me know by sending me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Florida Foreign National Mortgages

Adonai Financial | Florida Home Mortgages — Tue, 04 Mar 2008 20:12:32 -0600

By Dustin R Burke, Adonai Financial

Foreign Nationals are individuals from other countries who purchase or refinance property in the United States. The property can be a commercial property or a residential property. Domestically the foreign national market has grown due to the weakened US dollar. The cheaper dollar makes US property very attractive to individuals from abroad.

Can a foreign national still get a dollar mortgage for a property the desire to purchase or refinance in the US? Yes, and it is easier than one may think.

Residential mortgages for foreign nationals are available on terms similar to the terms available to those with legal status in the US. Both fixed rate mortgages and adjustable rate (variable rate) mortgages are offered to citizens abroad. Interest rates are competitive starting as low as the high 5’s on some programs.

The documentation required on residential mortgages will very from bank to bank and bank program to bank program. The larger the down payment the less documentation that may be required. The minimum down payment required is typically 20 – 25% and requires proof of employment, income, assets, etc.

If an individual prefers they may choose a program that does not require documentation of employment, income, assets or even a credit report. These loans are called state, limited, reduced, or no documentation loans. These loans facilities typically require a down payment of 30% or more (rarely more than 40%). Down payment and documentation requirements can even depend on the type of property (house, condo, etc.) and even the specific neighborhood. An area that is considered a “soft market” may require a higher down payment.

As you can imagine there is a lot more information available than can be placed here. If you would like to get more information or have any specific questions on loans for foreign nationals, or any residential mortgage loan, please feel free to contact me -- I’d be glad to answer any questions you have.

Contact our office at 863-680-2700 or send me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

Lakeland, FL Restuarants - The Antiquarian

Adonai Financial | Florida Home Mortgages — Mon, 03 Mar 2008 08:46:46 -0600

By Dustin R. Burke, Adonai Financial

As a local and small business owner I tend to try and support the same hoping that other small business owners will return the favor. Its my way of putting that “Do unto others” mentality into practice. I am also one of those people who like to find those special hideaways that few people know about.

The Antiquarian Restaurant at 211 E Bay Street in downtown Lakeland is just one of those places. The menu is continental and the atmosphere is eclectic. The food is always unmatched in preparation.

The portions are not over filling and leave you satisfied – not stuffed. You can expect to spend $10/person at lunch at $25+/person for diner. Its a friends, white table cloth environment. There is live jazz music on Friday nights and the ambience offers just what you need to enjoy a 5-star dinner.

It is well worth the price and you’re investing back into the downtown Lakeland community. They also have an extensive wine selection that raises the bar and a friendly staff and ownership.

Have you dined at the Antiquarian? Do you know of any hideaways in Lakeland? Let me know by sending me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

NLP: Technology of Achievement

Adonai Financial | Florida Home Mortgages — Mon, 03 Mar 2008 08:05:43 -0600

By Dustin R. Burke, Adonai Financial

I recently started a personal study on the science of NLP: Neuro-Linguistic Programming. I’ve been a real amateur with it for several years, so I thought it was time to take things to a higher level.

The book I am reading defines NLP as:

… the study of human excellence.

… the ability to be your best more often.

…the powerful and practical approach to personal change.

…the new technology of achievement.

NLP has several presuppositions but if they could all be summarized in one phrase it would be people work perfectly. I recently posted a faith based or religious topic called Faith Speak. To oversimplify we summarize the words we speak should reflect the outcome we expect.

While I believe this is true, NLP raises the bar in this type of thinking. When the theory states the people work perfectly it means our specific thoughts, feelings, and actions will consistently produce the same results. These results consistently give us a positive (happy) result or a negative (un-happy) result. If we want better results we need to change our actions, feelings and thoughts. The NLP Suppositions are:

*** The map is not the territory.

*** Experience has a structure.

*** If one person can do something, anyone can learn to do it.

*** The mind and the body are part of the same system.

*** People already have the resources they need.

*** You cannot NOT communicate.

*** The meaning of your communication is the response you get.

*** Underlying every behavior is a positive intention.

*** People are always making the best choice(s) available to them.

*** If what you are doing isn’t working, do something else, anything else.

So, there begins my new quest for achievement in excellence. I’ve already gone through a few techniques and have seen amazing results in myself. Have you ever studied NLP? What are your results? I’d like get more feedback so send an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

________________________________________________________________________________________

Adonai Financial Corporation

http://www.adonaifinancial.com/

---The content of this blog is my opinion---

My Wachovia AE

Adonai Financial | Florida Home Mortgages — Thu, 28 Feb 2008 16:51:50 -0600

By Dustin R Burke, Adonai Financial

Its hard to find an AE in today’s market who’s worth their salt. Well I’ve got one at Wachovia. I’ve posted a couple blogs on Wachovia / World Mortgage (Part 1 / Part 2). What I failed to mention was the excellence of their Account Executives. Mine is Steve Corn and he has always gone above and beyond what most other AEs do. He will take the time to work every angle possible to get your deal approved. Sometimes the underwriting and appraisal results are less than desirous but the extra effort is noticed and appreciated.

Although I’ve detailed what I believe are severe problems with how the bank determines value and applies risk to certain neighborhoods, Steve makes the unbearable palatable.

So, if you need a wholesale AE with Wachovia I highly recommend Steve.

Do you have an AE who goes above and beyond the normal call? I’d like to hear about it. Please send me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

New FNMA Loan Limits - Who Will See An Increase?

Adonai Financial | Florida Home Mortgages — Wed, 27 Feb 2008 16:40:33 -0600

By Dustin R Burke, Adonai Financial

The buzz is all about the new FNMA loan limits. Yes, the new limits will be $729,750, but is not a carte blanche solution for all markets – not everyone will benefit. To find out what the changes mean to you check out FNMA New Loan Limits – What does it mean.

SunTrust Bank put out a statement today detailing who will benefit from the recent announcement.

Who will see an increase in limits?

The new FNMA loan limits are restricted to 125% of the area’s median home prices. SunTrust estimates that only 20 of the larger MSA counties will see an increase in loan limits and only six will see the limits reach the maximum of $729,750 -- of those six counties five are in California and one in Hawaii.

If is also estimated that 15% of all non-conforming loan will be affected.

What do you think about the new conforming loan guidelines? Do you think it will help? Send me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

New FNMA Loan Limits - What does it mean?

Adonai Financial | Florida Home Mortgages — Wed, 27 Feb 2008 16:15:24 -0600

By Dustin R Burke, Adonai Financial

The Associated Press announced that federal regulators will allow Fannie Mae and Freddie Mac to raise loan limits on conforming loans to $729,750. Is this something we should be excited about? It sounds great, but there are several things we don’t know yet.

SunTrust Bank put out a statement today about what we know and who will see the increase:

What we know today (expect to see changes)

• The bill sets the FHA and conforming (FNMA/FHLMC) loan limits to the lesser of $729,750 or 125% of an area’s median home sales price. If 125% of an area’s median home sales price is below the current conforming loan limit of $417,000 the $417,000 still applies. You may not feel the benefits, but you will not be any worse off than you are today.

• The FHA and conforming limit changes are meant to be temporary and are set to expire on Dec 31, 2008 (unless extended – which is doubtful).

• The new limits will apply to 30 year and 15 year fixed rate, fully amortizing, and owner occupied.

• ARMs are being considered, but if allowed, the increase will likely apply to one ARM type (forexample, 5/1s).

• FNMA will have other credit overlays including LTV limitations (probably 90% or less).

• The limits will be effective as soon as the bill is signed, FNMA determines pricing.

What do you think about the new conforming loan guidelines? Do you think it will help? Send me an email to dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

Central Florida Foreign National Mortgages

Adonai Financial | Florida Home Mortgages — Mon, 18 Feb 2008 13:46:15 -0600

By Dustin R Burke, Adonai Financial

There have been a lot of loan guidelines changes for foreign nationals in recent months. The most common question I keep getting is, “Are banks still lending to foreign nationals?” The answer is, “Yes, banks are still lending to foreign nationals in central Florida.”

The requirements are somewhat “stiffer” than they were 1 year or even 6 months ago, but still very reasonable. In central Florida, a foreign national can get a loan with as little as 25% down. Most banks require the borrower to document their income with this amount down.

If the borrower cannot document their income they may need to put down 30, 35, or even 40%, depending on the bank and the specific neighborhood (neighborhoods determined to be higher risk by the bank).

Rates are also very competitive starting in the mid 6’s on a 3 or 5 year fixed ARM and in the low 7’s on a 30 year fixed mortgage.

These are the basics for a foreign national buying a single family home to use as a vacation home. If you’re looking for more exotic type properties (i.e. condo-tels) then expect the guidelines to tighten a bit more.

What are your experiences working with foreign nationals? Send me an email at dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

ARM or not to ARM?

Adonai Financial | Florida Home Mortgages — Fri, 15 Feb 2008 16:14:14 -0600

By Dustin R Burke, Adonai Financial

ARM or not to ARM? I work with clients from all over the world, from New York to London to Tampa to Dubai. And, there are basically two contrasting views on ARM loans: the “middle class” American view and then everybody else.

It’s my observation that overwhelming middle class American clients prefer, if not demand, a fixed rate mortgage for the entire term of their loan. Contrast this with international clients, who prefer, if not demand, a variable rate mortgage (as they call it), or adjustable rate mortgage (ARM, as we call it).

Why is there a difference? Douglas Duncan, chief economist at the Mortgage Bankers Association of America stated that the average mortgage life is three to five years, but 83% of mortgages are taken out for 15 years or more. Adjustable-rate mortgages have lower start rates than fixed rate loans, but most American borrowers remain skeptical. Why? I believe it is overwhelmingly because the loan facility options have not been properly explained to them.

When is an ARM right for me? If this is your first home with expectations of building additions or future upgrades an ARM may make more economic sense. If you’re an investor who only plans to hold a property for a couple years, then consider an ARM.

You also need to be willing to stomach the risk. The risk protection isn’t free on fixed rate loans, but you might be better off without, unless you absolutely cannot handle an increase in future payments.

An ARM loan worked for me. I’m in mortgage business and I don’t have a fixed rate loan. Why? Because, I know the statistics that I will either sell my home or refinance within 5 years. Currently, I am two years into a five year fixed and I am very glad I did. I saved over $100/mo in payment verses a fixed rate loan and as expected my wife and I will be ready to upgrade in a year or so.

The ARM worked for me, and used properly it may be a better option for you.

What do you think about adjustable rate mortgages? Send me an email at dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

Foreign National Loans

Adonai Financial | Florida Home Mortgages — Fri, 15 Feb 2008 15:19:13 -0600

By Dustin R Burke, Adonai Financial

Foreign National loans are loans made to international clients, or clients who do not keep their primary residence in the United States. In recent years foreign national loans have become increasingly popular because of the waning US dollar. The weaker dollar makes Florida real estate, and other US real estate, very appealing to purchasers from other countries.

It is relatively simple for foreign nationals to obtain competitive dollar financing in the US for a property secured in the US. The borrower cannot have diplomatic immunity and it’s preferable if they participate in the Visa Waiver Program (most countries do).

The current mortgage market requires that the borrower put at least 25 percent deposit, document their income via an accountants or employer letter, and verify the funds for deposit belong to them.

If a borrower cannot provide income documentation and need to do what is called a “stated income” loan, then the borrower can place an extra 5 percent down towards the deposit.

The bank requires an appraisal or valuation report on the property and some banks require an international credit report. It takes anywhere from two to four weeks to complete the loan paperwork and is very simple process.

What are your thoughts on loans to foreign nationals? Send me an email at dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

Mortgage Market Moving Goalposts - f.k.a. Real Estate Appraisals

Adonai Financial | Florida Home Mortgages — Fri, 15 Feb 2008 11:57:34 -0600

By Dustin R Burke, Adonai Financial

As a mortgage professional I am often asked by homeowners or potential homebuyers, “What this home worth?” My answer is always an oversimplified, “Its worth what someone is willing to pay for it.” Even though in conventional wisdom this answer is true, I am considering a new reply. In today’s market would be better to say, “Its worth what you lender thinks it is.”?

I recently sat down with a guy who said, “Real estate appraisals today are moving goalpost for borrowers.” And, I think he’s probably right. There is a lot of speculation, fear, and hesitation from home buyers, people refinancing, lenders, and the like. And, as we know, home prices have fallen in value.

There have been discussions about common sense underwriting, apparent redlining, soft market policies and tightening general credit requirements. But, what we haven’t read about or seen on the news is how value is being applied to our greatest asset – our homes.

Almost all home loans require a real estate appraisal – a licensed Real Estate Appraiser’s certification of the homes value. Each state has their own appraisal requirements that appraisers must follow to determine the homes worth. What has happened more and more in recently is that banks have gotten into the appraisal business.

The banks have done this because there have been, in times past, crooked appraisers would skew the value for a mortgage broker, or Realtor, or homebuyer. Banks have millions (if not billions) of dollars in losses over the past two decades due to unscrupulous appraisers. I believe that 99%+ of all appraisers do the right thing. The losses have been incurred by a very small percent of the workforce.

To curb these losses the banks would perform appraisal reviews on some (or all) files they received to make sure that we okay. An appraisal review needs to determine if the information used by the appraiser is accurate. But, recently we’ve found that banks such as Countrywide and Wachovia take these reviews a step further. Banks now require use of a limited pool or appraisers or have “in house”, bank employee, appraisers to complete the report.

Well, that in itself sounds okay, but an appraisal should be completed by an independent party. When you have appraiser employees working for the bank you’ve skewed the relationship so that the bank is in control of the value. When you have banks and appraisal firms enter into exclusive service arrangements you then give the bank power of the appraiser and it influences value. And, this is exactly what has happened which has done a disservice to homeowners and the market as a whole.

Banks argue, “It’s our money. We’ll do things as we want.” My response to them is, “You’re getting exactly what you’ve asked for.” There has been a massive movement by the banks and lenders to “reign in” appraisers. It is only causing more chaos in the market.

Of course, no one wants to be upside down in value. And now buyer wants to buy a home for more than its worth. But, if we have seller willing to sell, a buyer willing to buy, an appraiser certifies the value, and a review appraisal the verifies the appraiser provided accurate information then the value is what the parties say it is, not what the bank says it is.

Recent Example: I’ve been working on a new project in central Florida. It is 70 single family homes, each home is identical. Yes, they are identical except for the elevation and color. Logic and commons sense would say that all of these homes are worth the same, right? Wrong.

We closed several units in the project with purchase prices around $421,000. There was a two week gap between the closing of the files and then the submission of new one on the same street. Remember, identical houses. The bank, in its infinite wisdom, by and through its employee review appraiser decided that the homes were no longer worth $421,000 and decided they were worth $285,000. In short, the bank determined there was a 33 percent market correction in a 14 day period. And, this is not an isolated incident. It’s becoming more and more prevalent especially in more exotic markets.

This bank in particular decided that the value on property is what the bank could sell it for in 90 days. We’re not in a 90 day market, but a 360 day market. It was and is an unrealistic way for banks to determine value.

So, what’s the solution? It’s really very simple. Give the real estate appraisers freedom to do their job. Let the market decide property values. Provide checks and balances, such as review appraisals to protect the bank from unscrupulous appraisers. But banks, stay out of the appraisal business.

What is your opinion? Send me an email at dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

Mortgage Market Common Sense - or lack of it...

Adonai Financial | Florida Home Mortgages — Fri, 15 Feb 2008 09:55:59 -0600

By Dustin R Burke, Adonai Financial

What ever happened to common sense? There seems to be a shortage of it everywhere: from restaurants to the movie theater to Wall Street to the banks we are in need of common sense.

Well, I am a mortgage guy, so this is going to relate to the lack of common sense in the mortgage market. I've heard people say that this epidemic is a recent occurrence, but it's really not; we've been in short supply of it for a very long time. Now this is not attempt to bash the underwriters or banks or even the mortgage brokers themselves.

This is an attempt to shed some much needed light on a cultural problem that rooted itself in very important industry. We've heard there are problems with those now famous sub-prime loans or those state-income loans or those negative amortization loans. These loan products are not the problem. The problem is how these products were used.

As of today LenderImpode.com shows 226 banks and lending institutions that have gone "kaput". Some of these lenders are rightfully out of business and some were just caught up in the mess of it all. The lenders that are rightfully out of business, in my opinion, originated loans that they knew, or should have known, would not perform well.

Really, does it make prudent business sense to give a person who works at Walmart a 100% negative amortization loan for $550,000? Or even $300,000? Or even $200,000? I don't care what rational you use; we know that this loan will probably not perform well. So why did the banks originate this type of loan? It was because of lack of common sense and greed.

Now, I'm not trying to say that stated loans are bad or even that 100% loans are bad. Both have their proper place, but common sense should be our guide, not bright-line rule underwriting guidelines. Personally, I will not originate a loan that I believe will not perform well. I have been in the business for 10 years and there is only 1 loan, which I know of, that has ever gone into foreclosure, and it was the second loan I had ever done -- frankly I just didn't know better.

There are good reasons to do sub-prime loans, stated income loans, 100% loans, and even negative amortization loans. The industry just hasn't figured out when these products are acceptable and when they are detrimental to the market -- hence the problem we are in now with the real estate "depression".

The pendulum of mortgage reason (or lack of it) spurred a white hot real estate market. It now swung back now starving the market of much needed liquidity. There is a flood of well qualified borrowers who cannot get into the market because over-stringent underwriting guidelines.

If a buyer with a 750 FICO wants to buy a house, puts 5% down, and his new house payment will be less than his rent payment then I do not care what his income is. He/she has show they can make the payment, so make the loan.

If a buyer with a 660 FICO wants to buy a house, puts 40% down, and wants a negative amortization loan, fine. It will take him/her 10 years to eat all their equity. Make the loan.

If a buyer with a 630 FICO wants to refinance their home, has 25% equity in the property, and the new mortgage payment is less than the old then I do not care about his income. He/she made the old mortgage payment; he/she will make the new one.

So, what's the solution? Train underwriters to write common sense loans and then let them do their job. The training for underwriters is a disaster. It is a manual of bright-line rules that restrict qualified borrowers and reward those doomed to default.

Before the days of secondary markets and bright-line rules, loans went before a "loan committee" who discussed the loan, the strengths and the weaknesses. A group of educated financiers made a decision and then were held accountable for it. Bring back a common sense approach to mortgage financing.

What is your opinion? Email me at dustin.burke@adonaifinancial.com.

"Adonai Financial, your friends in the mortgage business!"

Soft Markets -- the new way to redline.

Adonai Financial | Florida Home Mortgages — Fri, 15 Feb 2008 08:25:38 -0600

By Dustin R Burke, Adonai Financial

If you haven’t already heard the term “soft market” – you will. As most of us know certain areas of the real estate market have been in decline for around a year now. The correction has appeared to have been mild, until recently where more and more markets appear to have accelerated into a free fall.

The banks and lenders, in an attempt to mitigate loss, have implemented round after round of tightened guidelines. Each time banks tighten the money supply it becomes harder to purchase and refinance homes thereby further starving the real estate market of much needed liquidity.

The new buzz word is “soft markets”. Soft markets are those certain counties, cities, zip codes, or even neighborhoods that are declining in value. Recently, Countrywide, the nation’s largest mortgage servicer, implemented as numeric rating certain markets to determine the severity of the areas that have been tagged a soft market. An area that receives a numeric rating of 1 – 3 is defined as a moderate risk and an area receiving a rating of 4 – 5 is defined as high or severe risk.

HSBC followed Countrywide’s lead and also implemented a less complicated, two tier system defining areas as “soft” or “stressed”. These systems have been put in place to try and mitigate losses.

When are has been defined in one of these ways the banks have decided to lower the maximum loan-to-value ration (the maximum percentage a bank will lend on a property) by 5 percent, and in some cases up to 10 percent. So, in a normal market a borrower can by this house with 5% down. In a soft market he/she will have to put 10% down or even 15% down is the market is defined as “stressed”

Here is the problem with this: Areas that are first to be affected by the stresses of the real estate decline are those with people of lesser means and then onto the middle class. When you take a populous who is already under the strain of a depressed market mixed with a looming recession this action only compounds the problem by limiting the borrowers who will qualify to purchase in that specific area.

So, how is this redlining? I’ll tell you. Redlining is loosely defined as denying or increasing the costs of services of banking, mortgage, etc. to residents in certain areas. When banks offer loans to similar borrowers and require one borrower to place 5 percent down and the second borrower to place 10 or 15 percent down simply because of the area, with no other distinguishing fact between them it become redlining and only further hurts the market.

What is your opinion? Send me an email to dustin.burke@adonaifinancial.com.